When were services of temporary contract personnel treated as work performed by the customer's own employees rather than a purchased taxable service?

Plain-English summary

Temporary personnel supplied through an agency could be treated as performing services as the customer's employees when all three conditions were met:

• the service normally was performed by the customer's own employees;
• the customer provided every necessary supply and piece of equipment; and
• the temporary help worked under the customer's direct or general supervision.

The treatment did not apply to a contractor hired on an ongoing basis to perform a taxable service, such as an annually renewed janitorial contract.

It also did not apply when contract workers performed taxable work that the customer's regular employees did not actually cover because the business was understaffed—for example, a facility needing 22 cleaners but employing only 12 regular cleaners and filling the other 10 positions through a janitorial company.

Common questions

Was ordinary temporary replacement help treated like employee work? Yes, when all three stated conditions were satisfied.

Did an ongoing janitorial contract qualify? No.

Did filling a chronic staffing shortage for taxable work qualify? No.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/8909L0956G10

Original ruling text

COMPTROLLER OF PUBLIC ACCOUNTS
STATE OF TEXAS
AUSTIN, 78774

September 14, 1989

Dear ***:

This letter is in response to our recent telephone conversations
regarding my July 12, 1989 response to your July 5, 1989 letter regarding the
taxation of service provided by temporary contract personnel.

The services performed on a temporary basis by contract service providers
will be considered performed by employees if the following criteria are met:

• the service is normally performed by the employer's own
  employees;

• the employer provides all supplies and equipment necessary;
  and

• the help is under the direct or general supervision of the
  employer to whom the help is furnished.

The above does not apply to contact service providers hired to perform
taxable services on an on-going basis, e.g., a contractor under an annual
renewable contract to perform janitorial services. The above does not apply to
contract service providers hired to
perform taxable services that are not performed by the employer's regular
employees because of understaffing, e.g., 22 employees required to clean
facility daily, but the employer only has 12 regular employees plus 10 contract
workers from a janitorial company.

This opinion is based on the facts presented. If there are additional or
different facts, the opinion may change.

If you have any questions or need more information, you may call
toll-free 1-800-252-5555, ext. 3-4683. The regular number is 512/463-4600.
You may write me t Tax Correspondence, Comptroller of Public Accounts.

Sincerely,
Eddie C. Washington
Tax Correspondence

COMPTROLLER OF PUBLIC ACCOUNTS
STATE OF TEXAS
AUSTIN, 78774

July 12, 1989

Dear ***:

Thank you for your letter of July 5, 1989, concerning the tax treatment
of temporary personnel.

The services performed by temporary personnel hired through temporary
personnel agencies will be considered performed by employees if the following
criteria are met:

• the service is normally performed by the employer's own
  employees;

• the employer provides all supplies and equipment necessary;
  and

• the help is under the direct or general supervision of the
  employer to whom the help is furnished.

This opinion is based on the facts presented. If there are additional or
different facts, the opinion may change.

If you have any questions or need more information, you may call
toll-free 1-800-252-5555, ext. 3-4683. The regular number is 512/463-4600.
You may write me at Tax Correspondence, Comptroller of Public Accounts.

Sincerely,
Eddie C. Washington
Tax Correspondence